McDonald’s U.S. Same-Store Sales Slip 0.2% as Quarterly Profit Tops Estimates

McDonald’s said Wednesday that comparable sales at its U.S. restaurants fell 0.2% in the quarter ended Sept. 30, the chain’s first such decline after five straight quarters of growth, according to Reuters. Fewer customer visits were largely offset by bigger average checks, the company said in its earnings release.

Investors focused on the bottom line. Adjusted earnings rose to $3.57 a share from $3.22 a year earlier, ahead of the $3.38 analysts expected, Reuters reported. The stock closed up more than 6% at $280.22.

The quarter in figures

• Global comparable sales: up 1.5%, in line with forecasts
• U.S. comparable sales: down 0.2%, versus an expected 0.1% drop, according to LSEG data cited by Reuters
• Revenue: $7.16 billion, up 1% and short of Wall Street estimates, Nation’s Restaurant News reported
• Net income: $2.49 billion, up 9%, or $3.51 a diluted share
• Quarterly dividend: raised 4% to $1.93 a share

Germany, Australia and Japan led growth abroad, while France and China were weaker, the company said.

Value deals at the center of the U.S. fix

Chief Executive Chris Kempczinski said U.S. results improved as the quarter went on after the company changed its value offers. He told investors he was encouraged by baseline traffic trends in September and October.

The chain has leaned on limited-time promotions, including a $2 breakfast sandwich, free fries with a $1 purchase and an $8 Quarter Pounder Extra Value Meal, Nation’s Restaurant News reported. It is testing low-priced bundled meals in about 40% of U.S. restaurants and aims to launch an entry-level bundle nationally early next year.

Franchisees remain a pressure point. Kempczinski said the company and U.S. operators are aligned on pricing except for entry-level value, Reuters reported, after executives said in August that about a third of franchisees had not joined the under-$3 menu. The company’s restaurant upgrade plan carries costs of about $800,000 per store, much of it paid by franchisees, with McDonald’s committing $8.5 billion to help offset them, according to Nation’s Restaurant News.

Sources: McDonald’s Corporation, Reuters, Nation’s Restaurant News.